This month marks the 10th anniversary of Craneware's (LSE: CRW) stock market flotation, and in that time the specialist software provider has seen a tenfold increase in its market value. Rapid growth has meant the Scottish firm is now the leading provider of revenue integrity solutions that improve financial performance in the US hospital and health system markets.
This morning the Edinburgh-based technology firm unveiled its annual results for the year ended 30 June, revealing record levels of revenue and profitability. Revenues were up 16% on the previous financial year to $57.8m, with pre-tax profits rising 22% to $15.9m.
The US is the largest healthcare market in the world, and consistently continues to fall short in its quest for value for the healthcare dollars spent. A greater number of people need access to the healthcare system, with a greater proportion of the population reaching the end of their working lives. All the while, the cost of delivering healthcare is increasing, and putting an unsustainable burden on the country and its citizens.
First to market
Therefore, revenue integrity solutions are becoming increasingly important, and Craneware is among the first to market with solutions addressing the move to value-based care, while also continuing to innovate. The group's products currently serve one in every four registered hospitals in the US, so I think there's clearly plenty of scope for further expansion.
With its shares trading at 31 times forward earnings, the AIM-listed technology firm commands a premium rating. However, I believe that management's strategy to expand its product suite as well as build on its established market-leading position means the business should easily grow into that lofty valuation over the coming years.
Despite Craneware's promising long-term outlook, there will be plenty of investors out there that will shun the software firm purely on the basis of its high earnings multiple. Investors can have long memories, especially when things turn sour, and the dotcom bubble and subsequent crash will have left deep scars. But the investing universe is very large, and I've unearthed another AIM-listed technology firm from north of the border that's not only profitable, but also trades on a far less demanding valuation.
Valued at around £340m, Iomart(LSE: IOM) is roughly the same size as Craneware in terms of market capitalisation, and has an equally impressive track record when it comes to growth. Since 2013 the Glasgow-based web hosting and cloud computing specialist has seen its pre-tax profits soar from just £4.37m to £14.65m, with the group's revenues more than tripling to £90m over the same period.
Iomart continues to deliver an ever broader range of cloud solutions, and in FY2017, revenues and profits again hit record levels. Our friends in the City expect this theme to continue, with consensus estimates suggesting a further 16% rise in the group's underlying earnings by FY2019, leaving the shares trading on a very reasonable P/E rating of 16. For a profitable small-cap technology firm with a solid track record, I think that's cheap.
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Bilaal Mohamed has no position in any shares mentioned. The Motley Fool UK has recommended Craneware. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.